CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2012

CSS INDUSTRIES, INC. REPORTS RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2012

CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the three and six months ended September 30, 2012. As previously announced, the Company sold the Halloween portion of its Paper Magic Group, Inc. ("PMG") business during the second quarter of fiscal 2013. Under the terms of the Purchase agreement, PMG will remain responsible for the manufacture, sale and distribution of all PMG Halloween products for the Halloween 2012 season.

Sales for the second quarter of fiscal 2013 decreased 4.5% to $133,485,000 from $139,725,000 in the second quarter of fiscal 2012. Income from continuing operations before income taxes for the second quarter of fiscal 2013 was $12,259,000, compared to $16,304,000 in the second quarter of fiscal 2012. Income from continuing operations for the second quarter of fiscal 2013 was $6,840,000, or $0.71 per diluted share, versus $10,314,000, or $1.06 per diluted share, in the second quarter of the prior fiscal year. Net income for the second quarter of fiscal 2013 was $6,921,000, or $0.72 per diluted share, versus $15,485,000, or $1.59 per diluted share, in the second quarter of fiscal 2012. As previously announced, during the second quarter of fiscal 2013, the Company incurred certain charges as a result of the sale of the Halloween portion of PMG that reduced the operating results for the three months ended September 30, 2012 as shown in the table below:

Second Quarter of Fiscal 2013

As Reported

Halloween Charges, net

Non GAAP Results

Income from continuing operations before income taxes

12,259,000

6,764,000

19,023,000

Income tax expense

5,419,000

1,532,000

6,951,000

Income from continuing operations

6,840,000

5,232,000

12,072,000

Diluted net income per common share - Continuing Operations

$ 0.71

$ 0.54

$ 1.25

Sales for the first six months of fiscal 2013 were flat at $194,552,000 as compared to $194,294,000 in the first six months of fiscal 2012. Income from continuing operations before income taxes for the first six months of fiscal 2013 was $10,926,000, also flat when compared to the $10,820,000 in the prior year. Income from continuing operations for the first six months of fiscal 2013 was $5,973,000, or $0.62 per diluted share, versus $6,867,000, or $0.70 per diluted share, in the first six months of fiscal 2012. Net income for the first six months of fiscal 2013 was $6,017,000, or $0.63 per diluted share, versus $7,916,000, or $0.81 per diluted share, in the first six months of the fiscal 2012. During the first six months of fiscal 2013, the Company incurred certain charges as a result of the sale of the Halloween portion of PMG that reduced the operating results for the six months ended September 30, 2012 as shown in the table below:

First Half of Fiscal 2013

As Reported Results

Halloween Charges, net

Non GAAP Results

Income from continuing operations before income taxes

10,926,000

6,764,000

17,690,000

Income tax expense

4,953,000

1,532,000

6,485,000

Income from continuing operations

5,973,000

5,232,000

11,205,000

Diluted net income per common share - Continuing Operations

$ 0.62

$ 0.54

$ 1.16

The Company's highly seasonal orientation has historically resulted in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

As previously announced in September 2012, the Company sold the Halloween portion of its PMG business to Gemmy Industries (HK) Limited ("Gemmy"). Under the terms of the purchase agreement, Gemmy acquired certain tangible and intangible assets associated with PMG's Halloween business. As part of the transaction, PMG will remain responsible for the manufacture, sale and distribution of all PMG Halloween products (such as Halloween masks, costumes, make-up and novelties) for the Halloween 2012 season. As a result of this transaction, CSS incurred pre-tax charges, net of proceeds, of $6,764,000 during the second quarter of fiscal 2013, which costs primarily relate to cash expenditures for facility closures of $1,375,000, severance of $1,282,000, professional and other costs of $1,341,000, and non-cash asset write-downs of $2,336,000 (including $966,000 recorded in cost of sales) and goodwill reduction of $2,711,000. The charges were offset by proceeds of $2,281,000. In connection with the exit of the Halloween product line, a portion of the goodwill associated with the Paper Magic Group reporting unit is required to be allocated to the business being sold. This allocation is made on the basis of the fair value of the assets being sold relative to the overall fair value of the Paper Magic Group reporting unit. During the second quarter of fiscal 2013, we paid $787,000 of cash related to these expenses and we expect to pay the remaining cash expenditures in the third and fourth quarters of fiscal 2013.

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 including, among others, statements reflecting the amount of cash expenditures and non-cash expenses the Company expects to incur in fiscal 2013 in connection with its sale of the Halloween portion of its PMG business during the second quarter of fiscal 2013. Forward-looking statements are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management as to future events and financial performance with respect to the Company's operations. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they were made. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including without limitation, risks associated with the Company's sale of the Halloween portion of its PMG business during the second quarter of fiscal 2013, including the risk that the cost of implementing the plan will exceed expectations, the risk that the expected benefits of the plan will not be realized and the risk that implementation of the plan will interfere with and aversely affect the Company's operations, sales and financial performance; general market and economic conditions; increased competition (including competition from foreign products which may be imported at less than fair value and from foreign products which may benefit from foreign governmental subsidies); increased operating costs, including labor-related and energy costs and costs relating to the imposition or retrospective application of duties on imported products; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration costs and the risk that the Company may not be able to integrate and derive the expected benefits from such acquisitions; the risk that customers may become insolvent, may delay payments or may impose deductions or penalties on amounts owed to the Company; costs of compliance with governmental regulations and government investigations; liability associated with non-compliance with governmental regulations, including regulations pertaining to the environment, Federal and state employment laws, and import and export controls and customs laws; and other factors described more fully in the Company's annual report on Form 10-K for the fiscal year ended March 31, 2012 and elsewhere in the Company's filings with the Securities and Exchange Commission. As a result of these factors, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

CSS' consolidated results of operations for the three and six months ended September 30, 2012 and 2011 and consolidated condensed balance sheets as of September 30, 2012, March 31, 2012 and September 30, 2011 follow:

Reconciliation and computation of income from continuing operations before income taxes, income from continuing operations and diluted income per share:

Three Months Ended September 30, 2012

Income from Continuing Operations Before Income Taxes

Income Tax Expense

Income from Continuing Operations

Diluted Income Per Share, Continuing Operations

As Reported

$ 12,259

$ 5,419

$ 6,840

$ 0.71

Included in cost of sales

966

354

612

0.06

Included in disposition of product line, net

5,798

1,178

4,620

0.48

Non-GAAP Measurement

19,023

6,951

12,072

nbsp; 1.25

Six Months Ended September 30, 2012

Income from Continuing Operations Before Income Taxes

Income Tax Expense

Income from Continuing Operations

Diluted Income Per Share, Continuing Operations

As Reported

$ 10,926

$ 4,953

$ 5,973

$ 0.62

Included in cost of sales

966

354

612

0.06

Included in disposition of product line, net

5,798

1,178

4,620

0.48

Non-GAAP Measurement

17,690

6,485

11,205

1.16

Management believes that presentation of results of operations adjusted for the affects of the disposition of the Halloween product line provides useful information to investors with respect to the Company's operating results for the three- and six months ended September 30, 2012 because it enhances comparability between the reporting periods.